Year: 2019

  • UGAZ And DGAZ Stocks – How To Trade Them

    UGAZ And DGAZ Stocks – How To Trade Them

    (Updated October 2021)

    UGAZ And DGAZ Stocks

    UGAZ and DGAZ are ETNs tracking natural gas prices.
    Energy exchange-traded products (ETPs) might be a good trading opportunity as much as energy ETFs.

    UGAZ and DGAZ stock closely watch the US Natural Gas Fund (UNG) and UNG tracks the price movements in natural gas. 

    Let’s make a distinction between those two.

    The main purpose of UGAZ (VelocityShares 3x Long Natural Gas) is to increase the daily performance of UNG by three times. That’s 300%. To make this clear, if UNG price grows 1%, UGAZ will display a daily increase of 3%. The best time to trade UGAZ is when you have a bullish sentiment on UNG.

    The main aim of DGAZ (VelocityShares 3x Inverse Natural Gas) is to generate profits from the losses in the UNG fund. DGAZ will increase the losses by three times inversely. Meaning, if UNG price drops by 1%, DGAZ could bring you a gain of 3%. So, the best time to think about DGAZ is when you have a bearish sentiment on the UNG fund.
    As you can see, both UGAZ and DGAZ have 3:1 leverage. That can notably boost your potential profit.

    Trading UGAZ and DGAZ

    If you want to trade them, it’s vital to watch the UNG fund. UNG fund is the basis of ETF that runs both of them. This can be a complex fund but you can go short in the long term and consider both UGAZ and DGAZ. Natural gas is a highly volatile commodity and UNG is not straight associated with natural gas in the physical sense. So, UNG isn’t a clever investment if you keep in mind it fell by more than 90% after its start. Also, it doesn’t pay dividends. Instead, UNG uses future contracts and OTC exchanges to find and copy the natural gas price. It doesn’t hold stocks. So, we can say that UNG isn’t a good investment by itself. There is where UGAZ and DGAZ come to the scene. If you don’t care for dividends and just want to keep the position for a short-time the long-term volatility of FUNG will not affect your investment.

    As we said, UGAZ increases the UNG gains, while DGAZ goes up when UNG falls in price. But keep for the short-term, as long-term holding is never recommended.

    UGAZ and DGAZ trading opportunities

    These products can be risky. Well, you have to follow the news as ETNs give 3-time leverage in a single day. As we said, when the natural gas price rises by 1%, UGAZ will rise by 3%, and DGAZ will fall by 3%. To repeat, if you want to hold UGAZ or DGAZ the percentage performance will oppose your expectations.
    A lot of circumstances may influence these products. For example, politics, global economy, supply and demand, weather, interest rates, and many others.
    The way to trade USO or UNG is to trade options. That will allow you to achieve better risk-reward levels. The profit potential could be tremendous.

    Bottom line

    If you look at the historical data you will find peaks over winter, for example, but also, sometimes the price can make a sharp move down.
    Why does this happen? The natural gas price depends on weather forecasts. So, you have to watch that. If you see the meteorologists are expecting a warm winter you can be sure the demand will be lower. So, pay more attention to DGAZ.
    The other factor that may influence the gas price is the change in natural gas supply. So, you have to keep attention on weekly natural gas storage reports.
    Both will give you the future course of the natural gas price. And, to add more pain, remember, UNG isn’t always successful while mimicking the gas prices. You have to be ready for the UNG price failure.
    UGAZ is a tactical trading tool. It provides 3-time exposure to its reference index, the S&P GSCI Natural Gas Excess Return Index. This ETN is not designed like a buy and holds an investment. The return can differ hugely from its initial exposure.
    It consists of complex effects and extreme concentration on quick period natural gas prospects.
    DGAZ is the inverse product, it is intended to be a tactical trading tool, not a buy-and-hold investment. It is for a one-day holding period.

  • Real Return On Investment

    Real Return On Investment

    Return On Investment

    Return on Investment or ROI, measures the profitability of an investment, for every amount you put in, what profit can you expect.

    Return on investment is a measure practiced to estimate the efficiency of your investment. Also, you can use it to compare the efficiency of different investments. ROI seeks to measure the volume of return on investment in comparison to the costs. So, to calculate ROI, you have to divide the return of your investment by the cost. The result will be displayed in a percentage or a ratio.

    How to Calculate Return On Investment

    ROI formula is:

    ROI = (Current value of investment – the cost of investment)/cost of investment

    Compounding interest sounds like alchemy for many new investors, but ROI is true magic. Particularly when your money rises each year.
    Let’s say you invest $2,000 at 5% interest. You’ll have $3,500 in interest after 15 years. Your initial capital would be grown by $1,500 of interest. But if you invest at a 5% annual compound interest, you will have about $4,158.

    But where is the magic?
    The magic comes now. What if you can earn a higher rate of return?

    What if you invest at 8% or 10%? This can be really important because it is your money and you would like to watch it grow.

    True magic lies in math.

    Let’s say you have an investment goal and also, you know how long you want to hold your investment. For example, you would like to sell some of your stocks after 2 years. Assume you invested $2,000 in the stock. And you did that. You sold your stock for, let’s say, $3,000. Great! You made $1,000 in profit. That is 50% of return which is amazing if you want to calculate it quick and dirty,  and incorrectly. But, you need to factor in your liabilities and annual inflation rate to calculate the real return on investment. Okay, you have to pay a capital gain taxes, for example, it is $150, so you ended at $2,850 which is still good. Yes, your return will not be 50% it is 42.5% after you pay capital gain taxes. Oh, wait! Where is the inflation? Yes, you have to calculate the inflation over those two years. Let’s say the inflation rate is 2.5%.

    $2,850/(1.025×1.025) = $2,713

    Your real value return will be 35.65%.  It is less than 50% of return what you may be expected but it’s still good.
    It was a bit complicated but correct, which is the most important. And it is for two years. Do your own math for longer periods.

    Several things you have to keep in mind.

    A good return on stocks has to surpass inflation, taxes, and fees. Only in that way, you’ll be able to build your wealth.
    Use ROI to compare investments even if they’re not related. It isn’t the same if you are buying blue-chip stock or small-cap. In short, everything is different. But, if you compare only ROI may provide you a clear insight into where you want to direct.

    ROI can be used in combination with the rate of return, which takes into account the time frame, which we did. You can use a net present value or NPV, which we did to calculate the real rate of return.
    The usual return on investment for the majority of investors is about 2-3%. It isn’t great. But if you keep your money in a bank account you will have a negative return, after you factor and pay all taxes and inflation. 

    A  good return on investment is 10-12% per year

    You can beat the market. That is everyone’s goal, right?
    But if you expect to earn 15% or 20% – it’s not going to happen. Or it will happen very rare. Don’t believe in false promises, they are counting on your lack of experience. If you build your financial security on bad premises you will end in a risky field. You may lose all your capital. If you have a more conservative approach to investments you will have a less stressful experience. Investing should give you certainty.

    Bottom line

    ROI is a popular measure due to its simplicity and versatility. Typically, use ROI as a simple measure of your investment’s profitability. Use the ROI on a stock investment. The calculation isn’t difficult. It is easy to understand. If your investment’s ROI is net positive, it is good. Avoid negative ROI, it is a signal of a net loss.

  • Big Market Players Are on Schedule

    Big Market Players Are on Schedule

    Big Market Players Are on Schedule
    The earnings reports season is continuing. So far companies’ earnings were better than awaited.

    by Guy Avtalyon

    Big market players are on the schedule this week.

    UPDATE 30/10/2019

    GE shares rose more than 11% after the company’s earnings report and beat analyst expectations. General Electric also boosted its cash flow for the year.
    Apple and Facebook each topped market expectations after the closing bell on Wednesday. Their stocks rose in after-hours trading.
    Apple posted earnings of $3.03 per share opposite to analysts’ expectations of $2.83 per share. Revenue was $64 billion and it was expected the $63 billion.
    Facebook also topped expectations with earnings at $2.12 opposite to the $1.91 forecast. Revenue was $17.65 billion vs. $17.37 billion forecasted.

    UPDATE 29/10/2019 

    Alphabet (GOOGL) didn’t match earnings expectations in Q3 2019. The earning is$10.12 per share and was expected $12.42.
    Alphabet shares dropped by 4% as the company failed expectations for earnings per share, but recovered and set at around 2%.
    The rest in the company’s report was almost as investors expected.

     

    It is time for the big market players to reveal reports for the fiscal fourth-quarter earnings.
    For example, Tesla stock reported a surprising profit and it’s stock price rose, but the Twitter stock fell. Last week about 21% to $30.75 on Thursday.  Among 168 S&P 500 companies that have reported earnings until Thursday morning, 80.4% hit or overcome analyst expectations.

    The companies have reported revenue hits about 62% of the time this season. This week we are waiting for several big players to raise the numbers.

    Monday, October. 28

    First is the Alphabet (GOOGL) on Monday (today). It has come under increased regulatory supervision, but shares stand good at 20%. Wall Street is predicting earnings of $12.28 a share on sales of $40.3 billion.

    Big Market Players Are on Schedule

    Wednesday, October. 30 is a day for a really big market players

    Apple stock (AAPL) has been up 54% in 2019. Recently the company announced that the new generation of iPhones went better than expected. The demand for new models increased and Apple has grown service offerings. For example, Apple Pay and Apple TV+ produced a lot of gains.

    We will see. Wall Street is predicting earnings of $2.83 a share with sales of $259 billion.

    Facebook is on schedule on Wednesday too. The market hasn’t paid much attention to regulatory concerns. Facebook shares (FB) have increased by 42% in 2019. Forget how Zuckerberg was grilled In US Congress and what did AOC ask him and Mark’s eye-rolling and constant sipping from a bottle with water.

    Wall Street estimates call for earnings of $1.90 a share and sales of about $17.4 billion.

    Facebook is followed by General Electric. Its stock (GE) could rise 23% this year, but it is down for 21% in a one-year period. The truth is that investors will keep attention on cash flow, debt reduction, and debt from legacy insurance liabilities. Wall Street estimates call for earnings of 12 cents per share and purchases of $28.9 billion.

    Big Market Players Are on Schedule

    Friday, November. 1 is reserved for Exxon Mobil (XOM).

    The company earnings have been spent on projects in the Permian Basin and in other countries. Goldman Sachs recently reported that earnings for the whole energy division should jump in 2020. Exxon Mobil stock increased by 1.3% during this year but decreased by 12% in a one-year period. For Q3 2019, Wall Street estimates earnings of 67 cents per share on trades of $60.9 billion.

    Bottom line

    As we know, good companies are delivering on-going earnings and revenue extension of at least 25%. For a long time, Facebook undoubtedly achieved that, the FB stock went higher and higher. Will Facebook get back to the winning trends?

    There’s a lot of skepticism toward Facebook’s future. Its new privacy-focused strategy might depress revenue growth. At the same time, an investigation, regulation, and legislation could restrict Facebook’s vigor. The same may happen to FANG stocks: Facebook, Amazon, Netflix, and Google. Really big market players.

  • Beijing-Shanghai High-Speed Railway Plans IPO

    Beijing-Shanghai High-Speed Railway Plans IPO

    Beijing-Shanghai High-Speed Railway Co that plans IPO

    Beijing-Shanghai High-Speed Railway Co that plans IPO reveals a company is more profitable than Apple
    Net profit scores 9.5 billion yuan ($1,34 billion), signifying a margin of 38%

    Beijing-Shanghai High-Speed Railway Co has requested to be listed on the Shanghai stock market.
    The company has filed an official application to enter the stock market. Now, the details about its operations are revealed. The company gained a net profit of $1.3 billion from the beginning of this year, which is a margin of almost 38% on the company’s revenue in the same period. This report shows them more profitable than Apple Inc, for example. The filing is published on Friday. Beijing-Shanghai High-Speed Railway Co covers the 1,300km line, made a net profit of $1.3 billion.

    The lucrativeness of the Beijing-Shanghai line shows how great success can be made with high-speed rail networks. This company’s trains drive at speeds of up to 350km/h which is about 217miles per hour. Thanks to these trains the distance between Shanghai and Beijing is possible to travel in 4,5 hours. The trains are comfortable and luxury. Last year this line transported more than 190 passengers which is approximately 6% of all high-speed rail users in China. From the beginning of this year, an average occupancy rate is 80%. The ticket costs are in a span of $78 (553 yuan) for the class of the standard seat up to $130 for the first class. 

    China’s railway efforts

    Despite the progress of this high-speed line, China Railway had a net loss of almost $29 million in the first 6 months of this year. Also, it reported notable debts of $0.75 trillion.
    The undivided attention is brought by Beijing-Shanghai’s IPO now.
    Analysts think that its planned initial public offering will be popular due to its good financial condition and prospects. For a long time, none of the Chinese railway companies didn’t show interest to be listed in the market. So, this easily could be a good sign for the industry’s presence in the market.

    The company stated in its filing it is positive about the future. The reason is clear. This route is most active and provides a potential for increasing traffic and more profit. The downside is that the company might be influenced by volatility in the macroeconomy.

    Beijing-Shanghai High-Speed Railway Co has 67 employees. Also, it has assets of $26.48 billion and liabilities of $3.82 billion. But this ratio of 14, 4% is not bad in comparison to the 65% average for China’s rail drivers. The biggest shareholder is China Railway, followed by Ping An Asset Management and China Social Security Fund, the company stated in its filing.

    The China Securities Regulatory Commission (CSRC) revealed the filing information on its website. CSRC showed it received the company’s planned PO on Oct. 22.

    China’s railway investment was stable in the first 8 months of this year.

    How to invest in China stocks

    There is a lot of logic to get portfolio exposure to China but it isn’t easy. There are risks and challenges.

    For example, if you want to buy stocks listed on Chinese exchanges, first check if your local brokerage will allow it. The Chinese exchanges may ask you to open a brokerage account with some Chinese companies.

    You can find a lot of Chinese stocks listed on US exchanges through ADRs. Those are certificates issued by American banks for shares of foreign stocks. In this way, foreign companies share are available to American investors. Or you can buy shares in ETF Another possibility is to buy stocks traded over the counter or on “pink sheets.” You will notice that their tickers have “OTC” or ÖTH” in the symbol included. These stocks have tickers that include “OTH” or “OTC”.

     

  • When to Sell Option Call?

    When to Sell Option Call?

    If the trade is going in your favor or for the trade that is going against you – don’t wait until expiration to see what happens. Sell before.

    Fresh traders, particularly those with a little amount on the account, like to buy options. But do they understand all the rules? The vast of them somehow skip selling prior to the expiration date. The truth is that the call option could be sold at any time. Call options give you the right to buy some assets, you already know that. To know when to sell the option call, pay attention to several situations.

    Let’s say you own calls and you decide to let them expire worthlessly. That’s okay. Your decision. But if you forgot and the stock closes on the expiration date the options will automatically be exercised whenever it is “in-the-money” when the market closes.

    And it will be a problem when the next day comes. The next day, the day after the expiration date, the margin call will come. Where is the problem? When you buy an option call, you are buying the right to buy a stock. Did you know that? If you are new in the options trading it is likely you didn’t. And what happens? When margin call comes you have to pay for shares and you’ll be forced to sell your call options. So, it is better for you to sell your options calls before the expiration date.

    So, you have to close your trade before the expiration date.

    When you opened your position your aim was to make a profit, right? So, don’t wait for options to get too close to the expiration date because they will lose the value. As the expiry date is closer, the value is going down. To make a profit it is better to sell your options and close the trade. Of course, you may take a loss too but if you wait longer and as you are approaching the expiration date, the chances to avoid loss are almost zero.

    Avoid margin call

    Lett’s say you bought one call option. How to know when to sell option call? Don’t forget that one option controls 100 shares of stock. And let’s say the strike price is $30. If the stock closes at $30,03 your options will be automatically exercised and you’ll be the owner of 100 shares of stock. Further, your broker will send you a margin call if you don’t have a sufficient amount on your account to pay that stock. And what you have to do? You will be forced to sell the stock to close out your trade. More often, you will sell it below the exercise price. But it isn’t necessary to be your case. You can avoid this unpleasant situation. Just close out your open position before the expiration day. Before the market closes, of course.

    For a strike price, you can calculate the cost to buy a call option and the cost to use it. You can find plenty of websites with options quotes. All you have to do is to type a stock’s ticker symbol and get a quote. You will see a column with months arranged and with the options expiring that particular month. Remember, you can trade the option until the third Friday of the expiration month.

    Calculate options for a strike price

    Find your wanted strike price in the “strike” column. Strike prices are ordered from cheaper than the stock price to higher than the stock price. Suppose the stock’s price is $50 and the strike prices ranging from $20 to $70 in a $2 increase. And you want to calculate an option with a $60 strike price. And suppose you want to buy a call option with a $2 “ask” price.

    To calculate the whole price to buy one option contract you have to multiply the ask price by 100. In our example, it is $2 x 100 which is $200. No, it doesn’t amount to buying the stock, this amount of money you have to pay for the right to buy the stock. 

    Let’s go further. The next thing to do is to multiply the strike price by 100. That is an added amount you have to pay to use the option.

    $60 x 100 = $6,000

    This means you can buy 100 shares of stock for $6,000 before the expiration date.

    Use volatility forecast

    In general, volatility is extremely important when buying or selling options. Since “returning towards the mean” is especially noticeable on volatility, you can somehow easily forecast the volatility as it goes above a certain point or less than a certain point – it will, most likely, return towards the average volatility.

    You can check the VIX to measure market volatility. Learn here how to do it.

    Bottom line

    Don’t buy call options with the aim to own the stock when the options expire. Your goal has to be to buy a call option and profit when the stock price grows.  If call options expire in the money, you will end up paying a bigger amount to buy the stock. Much bigger than what you would have paid if you had bought the stock. If you want to hold the stock, buy it. Don’t play games with options. 

    And finally, one important note when it comes to questioning when to sell option call.

    The European-style options expire on the third Thursday of the month. The American options expire on the third Friday. Don’t forget about this time difference. This could result in huge financial losses for you.

    Forecast volatility, that’s a key ingredient in profiting from option trading.

  • Tesla Stock Jumped on Thursday the Most In the Past Six Years

    Tesla Stock Jumped on Thursday the Most In the Past Six Years

    Tesla Stock Jumped on Thursday the Most In the Past Six Years

    Tesla’s stock had its best trading day on Thursday since May 2013.
    The third-quarter was profitable and better than anticipated
    The investors are sure it is the beginning of rising to $4,000

    Tesla’s stock jumped big on Thursday after the company had a surprisingly profitable third-quarter. The turn came from excellent progress in its Shanghai factory and that caused the stock price to rise. Also, the fact that the company is making cash and boosting margin has influence.

    Tesla shares rising about 17% during yesterday afternoon’s trading and gain $298 per share. The traders that shorted the stock or were betting it will decrease in price, lost almost $1,4 billion, is S3 Analytics estimation. The closing price was $299.68, and 17.67% of rising was the confirmation of the stock’s best single day of trading since May 2013. 

     

    Tesla Stock Jumped Opposite to Wall Street Expectations

    This was surprising for Wall Street analysts too, they showed more optimism about Tesla’s future in the light of new stock price.
    But even with the opening price of $300 (the last time is seen in February this year) the stock continued negative for the year, down 10% for 2019.

    The important fact is that Tesla had good free cash flow in the last quarter. The company had a steady growth in overall earnings and sales. Having in mind that the auto industry is lowering it is a real success. 

    Distrust in Tesla

    Maybe the best example of distrust in Tesla arises on Wednesday just before the Q3 earnings report. ARK Group DMCC sold 150,000 Tesla shares but later they stated CNBC that its “conviction in Tesla has not changed” and that Tesla is still one of the most important holdings in Ark’s traded funds. The selling of Tesla shares was explained as “a portfolio management thing.” There are some rules related to Ark’s funds that say that no single stock can be more than 10% of their portfolio.

     

    You might be interested: The Boys Are Not All Right

    Bottom line

    Tesla stock jumped on Thursday while investors were amazed by the company’s third-quarter earnings report.
    The day before, the automaker reported improved third-quarter earnings per share of $1.86. That is less than $2.90 in the previous year, but it is above Wall Street expectations of a loss of 46 cents. Tesla made a revenue of $6.3 billion for the quarter.
    It returned to profitability and recorded positive free cash flow. Tesla reported in its Q3 that operating costs are at the below level since its Shanghai-based factory is fit for production ahead of schedule and since Model 3 production started. CEO Elon Musk said he was “super proud” of the Tesla team. 

    The current consensus among 33 surveyed investment analysts, according to CNN Money com. is to hold stock in Tesla. 

    Several Wall Street analysts boosted their price target on Tesla after it reported an unanticipated third-quarter profit and more economical operating expenses.

    If Traders-Paradise has good data, Tesla’s stock price could reach somewhere between $315 and $365 to the end of this year with a tendency to reach $2,500 in the next five years. Tesla stock is attempting to recover the 300 price level but the buy point isn’t clearly visible.

     

  • Square Stock – Buy Before It Grows

    Square Stock – Buy Before It Grows

    Square Stock - Buy Before It Grows
    Square, the fintech company has the same chief executive as Twitter, Jack Dorsey. Does SQ stock have another big run in store for investors? 

    By Guy Avtalyon

    The Square stock had a big drop back in August and it isn’t recovered yet. And as always it happened, traders who panicked started to sell, that caused individual investors to sell too. Since the drop in August and also, after the Q2 announcement the Square stock price held steady.

    This was a rocky year for Square stock. At the beginning of this year, the price grew, but the last quarter was disappointing for investors. The Square stock fell 25% during the past 3 months. But as far as we know, it could be a great opportunity to buy them.
    That decision depends on personal estimation on whether the stock is a chance today or it is at the risk of further dropping.

    The quarterly result expected to be released in November could be very important. The expectations among investors are lower this time but Square is still under pressure to reach its corrected estimates. If the company show increasing earnings that would be helpful for stock to rise. Analysts are expecting $597.5 million in Q3 revenue. Could they be wrong?

    Square’s revenue in the second quarter was higher by 46%. The company was generating $1.17 billion in revenue. So, we can say that this company is making money. 

    Surprisingly low guidance is what pulled the Square stock price down in the last quarter. So, the Q3 report could be a nice surprise in a positive meaning. Well, you have to know that sometimes the companies depress expectations to provide a space for recovery.

    Why to by Square stock

    Square shares are currently traded at $58.36 (the closing price on Wednesday, October, 23) which is a depressed price. The coming earnings announcement easily could put the stock price higher. 

    So, what we know from the past is – buy low, sell high. Having this in mind, this is the right time to buy Square stocks.

    The field in which Square could happen future extension is in the cannabis industry. Square’s service is open for companies selling hemp-derived CBD products legalized under the Farm Bill. As we know the cannabis industry will grow more and more. So, that is a great potential for the company and investors too. 

    Only the U.S. market is worth as much as $6 billion by 2025.

    Also, there is the company’s Cash App. Over the past 3 months, they had a great increase in users and activities. So big that the company had sales growth of 44%. This phone Cash App is a great potential for getting more customers and gain more profit. 

    Someone may say that the stock is too expensive. Yes, $58.36 isn’t cheap but it is lower than previously. But this is a fast-growing high-tech company. Keep in mind that Square’s extension isn’t done. There is still a lot of potential for developing. For long-term investors, it is a good choice. At least, it is always better to buy now before its recovery and watch how it is growing in the future. Square stock ranks among the top 10 fintech companies. It’s not unusual for big winners like SQ stock to improve more than 50% after scoring a huge run

  • Is PEG Ratio Really Useful?

    Is PEG Ratio Really Useful?

    Is PEG Ratio Really Useful?

    The PEG ratio is one of the most popular metrics. It is so easy to calculate it. It never takes more than 10 secs even if you are not good at math. 

    But, what do you think, is this extremely simple metric, this PEG ratio really useful?

    Let’s see. Let’s examine it a bit more on some examples.

    First of all, the PEG ratio or the price/earnings to growth ratio is a stock valuation measure. Investors use it to evaluate a company’s performance and investment risk. It is a measure, so it can be calculated. 

    When the PEG ratio value is 1 we can say there is an excellent bond between the company’s market value and its expected earnings growth. If the PEG ratio is higher than 1, the stock is overvalued. But when the PEG ratio is lower than 1, the stock is undervalued.

    The formula for PEG ratio is:

    PE Ratio (Price/Earnings) / Expected Growth Rate = PEG Ratio

    Assume we are examining two stocks with different characteristics

    Stock A company: 

    price – $20/share
    earnings – $4/share
    expected EPS growth – 5%

    Stock B company: 

    price – $40/share
    earnings – $4/share
    expected EPS growth = 20%

    For stock A company

    P/E ratio = $20/$4 = 5
    PEG ratio = 5/5 = 1

    For stock B company

    P/E ratio = $40/$4 = 10
    PEG ratio = 10/20 = 0.5

    If we study the P/E ratio for valuation plans, we will discover that the stock B company has an advantage because it has a P/E ratio that is 50% less than that stock A company has. But if you find that company A is going to improve its earnings 5 times faster than company B, you may modify your opinion. If you use the price to earnings growth, you will see that the stock A company trades at a lower PEG ratio than stock B company. So, what can we conclude? Company A stock may give a better value.

     

    But is that really true?

    Well, there are some weaknesses connected to the PEG ratio. Earnings growth is not an isolated thing in the market minds. To get a whole picture of the stock value you have to take care of many factors such as cash flow, dividends, revenue growth, etc.

    Further, when it comes to “growth” in the phrase “price/earnings to growth ratio” you will be faced with one problem when you are trying to value a company. You actually don’t know the rate of earnings growth. In the best case, you can guess or rely on Wall Street analysts. Having thin in mind, your PEG will be as good as your data is.

    Well, something is good with the PEG ratio. It is very useful for smaller companies but for large companies (for example Disney or Ford) where the growth isn’t so important to total returns, it can cheat.

     

    So, is the PEG ratio really useful?

    You have to keep in mind that it isn’t a mathematical result. The method is as good as its inputs. The future growth rate could be the main problem in this PEG formula. When you or any analyst make forecasts about the future it can be wrong.

    To make it clear, it is easy to calculate the PEG ratio for companies with weak growth. But, mature companies with excellent earnings and great dividends, have a slow growth rate. So, such companies will never have a PEG ratio of 1 or less. Right?

    It is almost the same for companies with fast growth.

    For instance, a company growing in a surplus of 30% per year will be incapable to maintain such a growth rate. Can you see how the PEG ratio is as good as its inputs? A huge amount of failures in the future earnings growth rises from a too optimistic or too pessimistic viewpoint for the company or industry. Getting an exact PEG ratio depends on what factors you use in the calculation. You may find that the PEG ratio is incorrect if you use historical growth rates. This one especially can lead to mistakes when future growth varies from the past.

    Bottom line

    Traders-Paradise wants to give some spotlight on the pros and cons of using the PEG ratio. As the answer to a question Is PEG ratio really useful, we can say: the PEG ratio is useful but only when you use it to improve a more precise discounted cash flow analysis or relative valuation.

     

  • NuVim Inc – Marijuana Penny Stock Under The Radar

    NuVim Inc – Marijuana Penny Stock Under The Radar

    NuVim Inc - Marijuana Penny Stock Under The Radar

    By Gorica Gligorijevic

    This company has two subsidiaries Stolle Milk Biologics, Inc., NuVim Powder, LLC. and stock price under one dollar

    Maybe you still didn’t notice this stock. But don’t worry, many didn’t. NuVim Inc stock is currently very cheap as penny stocks. It was traded at $0.0133 at the close of trading on October 21. But it is a stock worth looking out.

    Market cap $299,468
    Current price $0,0133

    NuVim Inc is a company from New Jersey. Actually, it was established in 1999 and is based in Lewes, Delaware. It sells vitamins and dietary supplement drinks. Why this particular stock is interesting to watch?

    Well, its current CEO Rick Kundrat was VP at Unilever’s Thomas J. Lipton Inc and managed the merger with Pepsi in 1991. This deserves to be noticed because of the fast-expanding cannabidiol (CBD) market global. Rick Kundrat has talked about a possible merger for NuVim merger partners. If the company moves into CBD-infused drinks it could be huge progress and stocks could be a goldmine.

    Cannabidiol is used for pain reduction. Moreover, it speeds up healing muscles and joints when have been weakened from hard exercise. But maybe the most important effect is in the field of arthritis or similar illnesses where it can help to reduce chronic pain. 

    NuVim, Inc. produces, distributes and sells beverage products

    The NuVim is a dietary supplement accessible in the refrigerated juice sections of elite supermarkets and fitness stores. You can find it in three flavors: chocolate, vanilla, and strawberry.  It helps to sustain the immune system, improves calcium absorption and digestion. NuVim contains a clinically proven natural prebiotic fiber. 

    NuVim INc is a small company with only 3 full-time employees, according to data from Yahoo Finance. From everything we know about this company, it falls into the packaged foods industry. The Company covers a range of user needs, like joint pain, muscle flexibility, wellness, weight control, nutrient supplement, and muscle recovery.

    When we put this company under the phrase “under the radar” we didn’t have its unrecognition among the investors in mind. The lack of information is obvious. It is very hard to find full information about them. The last info came from the short report:

    “During the second quarter of 2019, the company sold 1,000,000 shares of stock to Derek Spence for $10,000.”

    This was really cheap.

    As Traders-Paradise found, Derek R. Spence is Vi3’s CEO and Chairman of the Board. He joined Vi3 as an investor in 2012 and became a board member in 2014.

    Bottom line

    But what we all can see from its 3-months chart is the stock is doing well.
    Yes, it is a very low float stock that is actively seeking and interviewing merger partners. The merger could send this stock very high. Grab this stock while it is cheap and wait for it to grow.
    It isn’t expensive, honestly, it is very cheap. But this company has interesting potential. As support for this opinion, let’s repeat where is its focus. It is cannabidiol that is fast-expanding and becoming part of medicines, supplements, drinks. This company wants success and seeking for partnership telling us a lot. Grab it.

     

  • How To Know If a Stock is Worth Buying

    How To Know If a Stock is Worth Buying

    How To Know If a Stock is Worth Buying
    How to recognize if a stock is worth investing in?
    What causes a stock to be good or bad?
    What things to consider?

    By Guy Avtalyon

    How to know if a stock is worth buying? Let’s assume you are new in this field and how you can decide what stock to buy. For some investors, it is a tricky part. To be honest, it is hard for everyone. The risk is involved, the volatility of stock or market, the investment goal. Everything is on the table. But if you follow some rules connected to the estimation you can figure out how to know if the stock is worth buying. Yes, many people will tell you stock investing is like a wheel of fortune. And they are wrong. Investing is like solving the problem. Everyone has its own way, own style, but the goal is the same: solving a problem.

    Prudent investors must enter the stock investing as if they have to solve a problem. Step by step. 

    Buying stock isn’t like buying a new sofa and when you find it isn’t for your room you can take it back. When you buy stocks, you have to be convinced they will hold their value, increase in value, and you will gain profit when you sell or deliver to you notable dividends over time. The main point is to know when a stock is worth buying. 

    Look at the price

    When you have to decide if some stock is worth buying the first thing you will find is its price. You have to figure out how much the ownership of shares in some companies will cost you.

    The amount of money you have in your hands will determine how many shares you can buy but the most important is to know historical data about particular stock prices. If you find the stock has steadily increased over time you will know that you can expect a good value in the future. 

    Pay attention to revenue growth

    Share prices will grow if a company is growing. A company is growing when rising its revenue. Increasing revenue will show you if the company is strong. We can say it is a major indicator often called top line. The important part is not looking at revenue isolated. You have to observe all rise and drops in each quarter and year. And here is the tricky part. The positive trendline is good for the stock price but the revenue may be dropping or be flat and it is important to understand why that is.

    You should check the company’s current holdings, projections for future operations and stability. If you hear or read some news, no matter if they are local or even rumors that the company is doing bad, it is better to step back. You wouldn’t like to hold stocks with so much stress. Your money is involved and you could lose everything invested. So, check the company’s revenue, it is easy since almost all companies have their official websites where you can find all this info. 

    But keep one thing in mind. If it is a temporary situation and historical data shows its stock was good in price that can be good for you to buy a stock at a low price and wait for it to rebound over time.

    Some stocks may temporarily drop in price and it can be a good deal to buy them now because they have the potential to recover.

    What is the company’s earnings per share

    This info is important and you can easily count it. Just divide the leftover amount at the end of each quarter by the number of shares the company has sold, and you get the earnings per share. For example, if a company made $100 million in profits in the prior year and has 52 million shares, the earnings per share is $1.92. As an investor, you should pay attention to this since the higher earnings per share (EPS) shows you that the company is in good shape. And the tricky part again arises. Some companies can manipulate with EPS. The process is simple. They do it by buying back their shares. In that way, they are boosting EPS but not increasing profits.

    Use the technical and fundamental analysis to know if a stock is worth buying

    You will have some idea about stock’s quality if you check the prices over the past 200 days, for example. And you will see the trends. Trends are repeating. 

    Analysts think that by observing the movement over a determined period, you can define the baseline, the point where the stock should recover. Here the advice, don’t buy the stock at its highs, wait to come close to the baseline or to hit it. Some may ask how is good stock if hits the baseline. Well, when the stock hits the peak it is expensive, the price is increased, and the stock has no more space to run so the only possible scenario is to go down. If you buy a stock at its peak you will lose your money. So, it isn’t a good time to buy a stock.

    Also, perform fundamental analysis. That will show the current and projected financial aspect. Use that info to discover now’s value. Use the company’s statement and balance sheet to determine the business strength. It isn’t a 100% indicator,  but it is enough good sign of what you can expect from the company in the foreseeable future.

    How to know if a stock is worth buying

    One thing is sure and you must have that in mind when you are trying to know if a stock is worth buying.

    A company can’t manage every single thing that might affect the business. The general economy can influence the health of a company and its stock play. For example, consumer prices, the changes to interest rates can affect how a company is doing. That is not in connection with its own business. But, the stable economy produces companies’ wealth and share increases come with that. And opposite, share prices can stumble during times of economic uncertainty.

    You will find many analysts that issue reports and tips about individual stocks. These tips appear with “buy” or “sell” ratings. But analysts often disagree, so it isn’t recommended to depend on one report. Always compare several to know if a stock is worth buying.